Larry W. and Cynthia J/ Van Wyk - Page 15

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               Additionally, we note that 2 years after section 465(a)(1)             
          was amended to eliminate the at-risk limitations for S                      
          corporations,7 section 465(b)(3)(B)(ii) was added to the Code by            
          DEFRA section 432(c).  The logical inference, therefore, is that,           
          because the at-risk status of an S corporation is no longer                 
          relevant, where section 465(b)(3)(B)(ii) addresses the at-risk              
          status of a corporation borrowing from its shareholders, the                
          statute must refer only to C corporations that are subject to               
          section 465.                                                                
               For the reasons stated above, we simply are not persuaded by           
          petitioners' arguments or their interpretation of the statute.              
          Accordingly, we hold that, because the source of the funds                  
          constituting the loan is not excepted by section                            
          465(b)(3)(b)(ii), petitioner, pursuant to section 465(b)(3)(A),             
          is not considered to be at risk with respect to the loan.                   

          7    Previously, with respect to S corporations, the at-risk                
          limitations of sec. 465(a)(1) applied at both the corporate and             
          the shareholder level.  Sec. 5(a)(31)(A) of the Subchapter S                
          Revision Act of 1982, Pub. L. 97-354, 96 Stat. 1669, 1695,                  
          however, amended sec. 465(a)(1) by eliminating the at-risk                  
          limitations for S corporations.  See also H. Rept. 98-432 (Part             
          2), at 1507 ("In the case of a[n] * * * S corporation, the [at-             
          risk] rules apply at shareholder level."), 1507 n.16 (The at-risk           
          "provisions no longer apply at the corporate level as a result of           
          an amendment made by the subchapter S Revision Act of 1982 (Pub.            
          L. 97-354)" (1984).                                                         

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